Doctor of Philosophy (PhD)


Finance (Business Administration)

Document Type



This dissertation explores a controversial issue of institutional trading behavior with conflicts of interest and information sharing. Using firms sued for alleged financial misreporting, the first essay examines whether analyst-affiliated institutions reduce the portfolio weights of sued firms prior to their analysts releasing the information through downgrade revisions – trading huddles. Empirical evidence is consistent with this behavior, particularly among the institutions with investment banking operations but without underwriting relationships with sued firms. Institutions with underwriting relationships only reduce portfolio weights significantly when their analysts are the first to provide downgrades during the class period, which is a proxy for the private information production period during which the public has no knowledge of firms’ wrongdoings. The evidence of post-trading stock performance suggests that analyst-affiliated institutions with investment banking operations have superior information. Overall, the evidence implies that the allegation of pre-release activities by trading huddle is not without merit. The second essay investigates whether the trading behavior is affected by tension between the asset management division and the investment banking business. Investment banks may coerce their affiliated funds to support clients of underwriting business, which creates costs borne by the funds’ shareholders – conflicts of interest hypothesis. Empirical evidence supports the conflict of interest hypothesis. Affiliated asset management firms tend to hold or even increase their stockholdings of the underwritten, sued firms significantly in the class period, while underwriters hold or sell the firms. Overall, underwriters’ support for the clients comes at the fund shareholders’ expense.



Document Availability at the Time of Submission

Release the entire work immediately for access worldwide.

Committee Chair

Song, Wei-Ling